FX Play of the Day Recaps: June 19 – 22, 2023

It’s been another busy week for forex strategies with the best catalysts of all time forex calendar.

It’s been another powerful week for our strategies as arguably three out of four supported fundamental/technical ideas are moving in our favour, including a strong weekend push in USD/JPY.

Forex Week Setup: Possible GBP/AUD reversal near range resistance

To kick off the week, we took a look at GBP/AUD as the GBP had major catalysts ahead, as we discuss both bearish and bullish setups. The discussion focused mainly on price action and technical arguments as we wanted to stick to a neutral fundamental bias until the latest BoE rate and monetary policy statement later in the week.

And as you can see in the chart above, the bulls seem to have won this week, likely due to a combination of factors that are attracting bullish fundamental traders (most likely due to higher UK inflation and a bigger-than-expected Bank of England interest rate). , but also some Aussie sellers, most likely due to positive risk reactions and negative updates from China and Australia near the start of the week.

On the above chart, we can see that the bullish scenario we discussed (bullish range consolidation breakout) has played out, attracting technical traders along with fundamental traders to push British pound / Australian dollar Much higher this week to retest roughly the 1.9100 handle, well above the range of consolidation by about two ATRs per day.

Australian Dollar / Japanese Yen: Tuesday – June 20, 2023

On Tuesday we saw a spike in AUD/JPY volatility, in reaction to headlines from the People’s Bank of China (PBOC) and Reserve Bank of Australia (RBA) meeting minutes. Traders seemed to take both events as potential bad news due to broad risk sentiment and risky assets, which pushed AUD/JPY down rapidly.

We viewed this development as a potential short-term selling opportunity in the AUD/JPY, but after the immediate rapid move lower on news events, we thought buyers might come in to take some profits and/or take a shot at the longer-term-upside trend. at a better price.

So we thought waiting for a bounce before considering a short play makes sense, with the potential resistance area around the area between S1 pivot level (96.77) and today’s pivot point of 97.22.

after our discussion, Australian dollar / Japanese yen It continued to drop further before finding an intraweek low just above the minor psychological level of 95.50, followed by a slow rise during the day on Thursday.

The pair did not reach the target resistance area until Friday to enter the potential sale, which attracted net sellers. These players were most likely a mix of both technical players selling the previously strong area of ​​interest (highlight blue bar) and fundamental players selling risky assets in anticipation/reaction to weak PMIs, including a weaker-than-expected PMI update from Australia.

The result was a strong move one day to 95.50 where the pair found support (potential profit-taking before the weekend) again.

GBP/USD: Wednesday – June 21, 2023

The GBP/USD pair appeared on the radar on Wednesday after a big jump in volatility during the London trading session. Sterling traders reacted to the latest UK inflation update, again heated and attracted the short-term bulls before hitting the wall and returning to the downside not long after the event.

After finding resistance and reversal around a bearish ‘highs’ pattern and the 200 SMA on the 15-minute chart, we thought there was a high probability that the BoE would aggressively hike interest rates, which could ultimately be bad for the UK economy and attract the GBP. . financial bears. We also had expectations that Fed Chair Powell’s upcoming congressional testimony would be hawkish.

After our publication, it turns out that GBP/USD The bears could have stayed in control, riding that essentially lower “highs” pattern lower all the way through the day on Friday. This was the case despite the Bank of England’s surprise 50 basis point interest rate hike on Thursday, suggesting that traders were really more concerned about the rising odds of a recession than trying to game the idea of ​​higher interest rates attracting more buyers into the currency.

From a risk management perspective, there were multiple opportunities to short the downside and play up the scenario discussion in our original discussion. Congratulations if you managed to pick up some points in a very choppy week for Cable.

USD/JPY: Thursday – June 22, 2023

On Thursday, we spotted a consolidation and support forming to an uptrend in USD/JPY against the multiple arguments on the chart that could attract buyers, which is a big possibility if Fed Chair Powell’s testimony isn’t a “hard pullback” on the strong expectations that the RBI The Fed will continue to do so. high this year.

We thought that if buyers intervened around the technical mix of bullish lows, bullish moving averages, and Fibonacci retracement levels (approximately between 141.50 to 142.00), then there is a possibility that the price will reach previous highs around the psychological level of 142.50.

Well, the Fed’s talk remained hawkish through the end of the week, but the rhetoric came from Fed members Bowman and Daley, pointing to a high probability of a rate hike in 2023. An argument could also be made that the latest Japanese PMI update may have triggered Fundamental bears are attracted as it points to deflationary conditions for June, while US bulls are likely to focus on strong services PMI data from the US.

Altogether, these were the potential catalysts that pushed USD/JPY higher on Friday, well above the original resistance target of 142.50 to roughly test 144.00 before Friday’s close. One huge day run and congrats to all of you US dollar / Japanese yen bulls there.

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